UK ‘will import most oil and gas’ without investment
Britain will be forced to import almost all its gas and most of its oil from overseas suppliers unless billions of pounds are invested in new North Sea exploration and production facilities, according to a stark report from Offshore Energies UK.
In a clear warning to all political parties, the organisation said that without new investment, around 80% of UK gas supplies and more than 70% of oil will have to be sourced abroad by 2030.
Opposition to new oil exploration, such as the Cambo field west of Scotland, as part of the transition to clean energy, has dampened investment. But the Russian invasion of Ukraine has shifted opinion on the UK’s energy needs and the UK government is considering up to 12 licences in the North Sea.
For the first time, gas supplied to the UK from Norway now exceeds the amount provided by UK suppliers whose output fell sharply along with oil production last year.
OEUK’s 2022 Business Outlook forecasts a 15% per year decline in production – much faster than the predicted reduction in demand.
Offshore wind, whose expansion has been a major success for the industry, is still too small to be able to replace the declines in oil and gas output from the North Sea, it states.
Deirdre Michie, chief executive of OEUK, said: “Last year OEUK signed the North Sea Transition Deal, a partnership with the UK government supporting the nation’s transition to a lower-carbon future and providing safe and secure energy throughout that transition.
“But that transition will only happen if our policymakers can create and sustain the right environment for long-term investment across all forms of energy production.”
In a clear signal to the SNP and Scottish Greens that they should re-think their anti-oil and gas policies, she said: “To achieve that we need stable long-term regulatory policies, clear and predictable fiscal policies and improved political alignment across all the countries and parties of the UK.
“Energy security is now a matter of national security. Our policymakers need to plan not just for the coming elections but the coming decades.”
The OEUK research, led by market intelligence manager Ross Dornan, offers some stark insights into the impact on the UK if there is insufficient investment in energy – including offshore wind.
It shows that gas remains the UK’s largest energy source – supplying 43% of total energy last year, with oil the second largest at 32%.
Meanwhile, investment in the oil and gas sector has plummeted from about £16 billion a year in 2014 to £5.5bn in 2019 and a predicted £4bn this year. The causes are varied but the UK’s complex regulatory environment, plus the political disagreements around issues such as climate change and windfall taxes are all factors deterring investment.
Offshore wind, the most successful form of renewable energy to date, also requires significant investment if its expansion is to continue. The OEUK report finds that the UK must invest £60bn in 3,000 new offshore wind turbines if it is to meet its target of quadrupling wind-powered electricity generation by 2030.
Mr Dornan said: “About 75% of the UK’s total energy comes from oil and gas – about 2% up on last year. That is because 80% of our homes are heated by gas which is also used to make 42% of our electricity. We also have 32 million vehicles that rely on petrol and diesel.
“The energy gap between what we produce ourselves and that which comes from other nations will keep growing unless we invest in exploration and production on the UK’s continental shelf. We must also accelerate the development of cleaner energy like hydrogen. Investment now will give us energy security in the years to come.
“Additionally, the emissions generated by processing and transporting our own oil and gas are much lower than for imports.”
In response to the Russian oil and gas situation, Nigeria has said it is ready and prepared to provide the UK and Europe with much more gas than it currently does in order to offer an alternative supply.
Nigeria’s Minister of State for Petroleum Resources, Timipre Sylva, urged the European Union to increase investments in gas and hydrocarbon in Nigeria so the country will be able to meet Europe’s energy needs.
Mr Dornan said he was unable to comment on the minister’s offer.